How did ELF's revenue and expenses trend in Q3 2025?

e.l.f. Beauty (ELF) experienced notable growth in revenue and market share in Q3 2025, but faced challenges in managing expenses and maintaining gross margin. 1. **Revenue Growth**: ELF's net sales increased by 31% compared to the previous year's Q3, reaching $355.3 million. This growth was driven by strong performance across both retail and e-commerce channels in the U.S. and internationally. The company gained 220 basis points of market share in the U.S., indicating a successful market expansion effort. 2. **Gross Margin Improvement**: The gross margin for ELF improved by approximately 40 basis points to 71%. This improvement was primarily due to favorable foreign exchange impacts on goods purchased from China, cost savings, and inventory adjustments. These factors contributed to a more efficient production and supply chain, which is a positive sign for the company's operational effectiveness. |code|Ticker|Name|Date|Net Income YoY|Net Income|market_code| |---|---|---|---|---|---|---| |ELF|ELF.N|e.l.f. Beauty|2024 Q4|-10.581066108580574|1.4527E7|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q1|-10.234630122505992|4.7555E7|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q2|-42.83309789306002|1.902E7|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q3|-35.8040761678072|1.7261E7|169| |code|Ticker|Name|Date|Gross Profit Margin|Gross Profit Margin YoY|market_code| |---|---|---|---|---|---|---| |ELF|ELF.N|e.l.f. Beauty|2024 Q4|70.7172|4.853056086447887|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q1|71.2787|1.0694155931626559|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q2|71.1918|0.82053576992144|169| |ELF|ELF.N|e.l.f. Beauty|2025 Q3|71.2271|0.7409848493420349|169| 3. **Operating Expenses Increase**: Despite the revenue growth, Selling, General and Administrative (SG&A) expenses increased by $58.1 million to $218.2 million, accounting for 61% of net sales. This rise was mainly attributed to higher marketing and digital spend, compensation and benefits, operations costs, general administrative expense, retail fixturing, and visual merchandising costs, as well as depreciation and amortization. The increase in SG&A expenses reflects the company's investment in growing its brand and expanding its distribution channels. 4. **Net Income and Outlook**: ELF reported a net income of $17.3 million on a GAAP basis for Q3 2024. The company remains optimistic about its fiscal 2025 outlook, attributing its continued growth to the early stages of unlocking potential in digital, color cosmetics, skin care, and international markets. In conclusion, ELF's Q3 2025 financial performance showed robust revenue growth and improved gross margin, however, the company faced pressure on operating expenses, which could impact future profitability. The company's strategic investments in marketing and distribution are likely contributing to its market share gains, but it will be important to monitor expense management to sustain long-term financial health.